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- Elon Musk's Neuralink unveiled a successful test in mice and plans to implant paralyzed patients with electrodes that will allow them work computers with their minds. (Bloomberg)
- Executives from Amazon, Apple, Facebook and Google faced tough questions from lawmakers during 3 hearings on Capitol Hill yesterday. (NYT)
1 big thing: The inexplicable decline in retail sales growth
Headlines Tuesday painted a picture of a booming U.S. retail market: Amazon's well-covered Prime Day(s) generated an estimated $5.8 billion of sales and the Commerce Department's retail sales report showed an especially strong reading for June.
But a deeper dive into the data shows retail sales growth is slowing, with the all-important online component — the major source of growth, as brick-and-mortar sales struggle — cooling notably.
- “While several negative developments in late 2018 ... could have contributed to consumers’ skittishness, no single event could explain why shoppers curtailed spending growth in the second half of the year and continue to do so,” said Christa Hart, a senior managing director at FTI Consulting.
The big picture: More U.S. companies are doing business online than ever before, but online retail sales growth has been decelerating for 4 consecutive quarters, data from FTI Consulting's 2019 U.S. Online Retail Forecast shows.
- FTI's 20-year data set suggests that "online sales growth may have hit an inflection point and may experience decelerating growth going forward."
- Online retail sales have pulled back from 5%–6% growth in early 2018 to the mid-3% range so far this year, "for no obvious reason."
- Even Tuesday's strong U.S. retail sales report puts growth on pace for just 3.5% year-over-year, well below the pace of the previous 2 years and below the longer-term average.
What's happening: Online sales are taking a larger portion of overall retail, and slowing growth in that segment is reflecting slowing growth overall.
- "The key finding relates to multiple periods of e-commerce growth decline, which does not align with what we have seen over the past decade," FTI's managing director of corporate finance and restructuring John Yozzo, tells Axios in an email.
Details: Online sales growth has slowed to an average of 13.3% in the most recent 4 quarters from 16.1% a year earlier. It has weakened further to the low-12% range in the 2 most recent quarters. FTI projects the growth rate will fall to 5.9% in 10 years.
- "The degree to which this decrease in online growth manifests itself over the next year is yet to be known," Yozzo said, "but analysis suggests we may be experiencing an inflection point in e-commerce where the overall rate of growth remains in the low double digits."
Bonus: Amazon's growing share of the shrinking retail pie
While FTI's analysts believe Prime Day's big numbers are more smoke and mirrors than substance ("The ability of Prime Day to have a material impact on consumer discretionary spend is unlikely," Yozzo tells Axios), they do expect Amazon to continue to expand its take.
- FTI projects Amazon's share of the entire U.S. retail market will nearly double to 12.7% from 6.5% this year, boosted largely by third-party sellers, and its share of online U.S. retail sales will grow to more than 55% from the current 43%.
2. Bottom half of Americans are finally in the black
The total net worth of the bottom 50% of Americans fell to -$143 billion in the second quarter of 2010 — meaning the lowest 50% of earners had collective liabilities far outpaced their collective assets, largely underwater home and auto loans. Their net worth remained negative until Q1 2013, Federal Reserve data shows.
- The bottom 50% of earners' net worth rose to nearly $1.3 trillion in the first quarter of 2019. However, their share of total U.S. net worth has just this year risen above 1% of the total. The top 1% of earners' share is 31.1% as of the first quarter of 2019, according to the Fed's data.
What it means: "The recovery is just now getting to the bottom of the economy," Kevin Barry, chief investment officer at investment manager CAPTRUST, tells Axios. "At the end of 2015 the overwhelming majority of Americans would say, 'What recovery?'"
3. More credit investors see a recession looming
Credit investors in Bank of America-Merrill Lynch's most recent survey say they are growing more worried about a recession. Top concerns among investors surveyed included "Recession/deflation," "Asset bubbles" and "Currency war."
- The implied probability of a recession over the next 12 months rose to 20%, the highest level in the bank's survey of investors since September 2016.
4. Powell leans in to greater openness
Axios' Courtenay Brown writes: In one of his final speeches before a major policy meeting this month, Fed chairman Jerome Powell stressed the importance of communicating frankly with the public.
"Gone are the days when the Federal Reserve Chair could joke, as my predecessor Alan Greenspan did, 'If I turn out to be particularly clear, you've probably misunderstood what I said.' Central banks must speak to Main Street, as well as Wall Street, in ways we have not in the past, and Main Street is listening and engaged."— Powell's speech Tuesday at G7 Bretton Woods in Paris
Why it matters: The financial markets may have backed Powell into a corner to cut interest rates, but these days Main Street has his ear, too.
- In a novel series of public forums held the past few months, community leaders across the country have told Fed officials about the unevenness of the economic recovery.
- Since the latest "Fed Listens" event in Chicago, Powell has referenced this grassroots feedback in nearly every single public appearance to underscore the importance of extending the record-long economic recovery.
5. Peru has arrested all of its living ex-presidents
Former Peruvian President Alejandro Toledo was arrested in the U.S. Tuesday, on an extradition warrant stemming from corruption charges in his home country. Prosecutors are requesting 16 years of prison for Toledo and his wife.
Why it matters: Toledo was the last living ex-president of Peru not to have been arrested in connection with corruption charges for taking bribes from Brazilian construction company Odebrecht.
- The last president not sought by authorities for graft was Fernando Belaúnde Terry, who left office in 1985 and died in 2002.
The state of play: Despite the political chaos, Peru's stock market delivered world-beating returns from the start of 2016 to the end of 2017. An ETF tracking MSCI's Peruvian index (EPU) gained 114% during that time, far outpacing the S&P 500's 43% rise and almost doubling MSCI's broader gauge of emerging market equities, which rose 66%, according to data from Yahoo Finance.
- It has since underperformed both indexes, and is up just 7% year to date.